Investors on Wall Street are getting out of China and moving west. While investing in India certainly isn’t anything new, the moves lately come as global markets continue to pull billions of dollars away from China — especially as the country’s economy has shown slowing growth after two decades of surging.
Should Canadian investors get into India? And if so, how?
Why India?
India has been touted as the prime investment destination for not just the next few years but at least the next decade. And it’s not just United States investors that are interested; traditionally conservative Japanese retail investors are also losing Chinese exposure to India.
India continues to be the world’s fastest-growing major economy, and this has grown rapidly under Prime Minister Narendra Modi. The prime minister has been expanding infrastructure in the country and attracting global capital along the way.
Meanwhile, China continues to suffer from economic problems and a rift that has continued between the country and the United States as well as other Western powers. Now, India is looking like the new China, with a large economy that’s opening up to the world.
Growing pains
It’s true that it’s unlikely to be a smooth story for investors in India. After all, it’s still largely a poor country when looking at the overall population. Further, the stock market remains expensive, and the bond market is isolated.
However, it seems as though the risks could be well worth the reward. India’s gross domestic product (GDP) has climbed from US$500 billion to US$3.5 trillion in just the last two decades, after all. And that looks to continue in the near future.
Furthermore, India recently beat out Hong Kong in mid-January to become the world’s fourth-largest equity market. Now, investment firms across Wall Street predict it will become the third largest by as soon as 2030. So, how can Canadians get in on the action?
Think big
If you’re going to invest in India, then the best way would not be to start sourcing out companies in a country that many don’t understand here in Canada. Instead, it’s best to potentially leave this to the professionals, and that would mean investing in an exchange-traded fund (ETF).
One strong option to consider is iShares India Index ETF (TSX:XID). This fund comprises 50 of the largest Indian companies based on market capitalization. The goal is to use this to express a single-country view, providing long-term growth.
The XID ETF has also done quite well since coming on the market back in 2010. Besides the dip in the market around the crash in March 2020, growth has been quite steady. Shares are now up 168% since that time, and rising 18.6% in the last year, as of writing.
So, if you want access to India, this is certainly an excellent way to do so. And honestly, it seems everyone should want a piece of this growing pie. So, consider the XID ETF if you’re looking to gain access for not just the next year but the next decade at least.
